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Share buying frenzy in Malaysia

Publication Date : 20-08-2014

 

The buying frenzy on the local bourse reached new heights yesterday, with a record 5.1 billion shares worth an estimated 2.9 billion ringgit (US$915,700) changing hands.

The last time trading volume was above the four billion mark was in February 2012.

The euphoric market condition had been there since April, fuelled by the returning tide of hot money flowing from overseas, as fund managers bet that growth in the region will outpace those in developed markets.

“The strong overnight gain on Wall Street and regional optimism added to the euphoria,’’ MIDF Investment Bank head of research Zulkifli Hamzah said.

Topping the most active list yesterday was PDZ Holdings Bhd, with 376 million shares transacted, which equals to 41 per cent of the company’s issued capital of 869 million shares.

The stock has jumped 140 per cent over the past one month to close at 37.5 sen yesterday.

Surging runs by companies such as PDZ had propelled the FTSE Bursa Malaysia Small Cap Index 23 per cent higher year-to-date to a record 19,338 points yesterday, outpacing the FTSE Bursa Malaysia KL Composite Index’s (FBM KLCI) relatively flat 0.3 per cent performance over the same period. The benchmark index was up 10.4 points yesterday at 1,872 points.

The mood in the stock market is clearly on the mend after Central Bank announced on Friday that the economy expanded 6.3 per cent in the first half of the year.

This raised expectation that the central bank will upgrade its full year forecast and adjust its overnight policy rate higher by another 25 basis points before the end of the year.

“Foreign investors are buying ahead of the expected interest rate hike,” M&A Securities head of research Rosnani Rasul said.

“Central Bank has been ahead of the curve in raising rates and investors are positioning themselves to benefit from the anticipated rate hike,’’ she said.

Central banks from around the world will meet in Jackson Hole, Wyoming, in the United States from Thursday and the market will be keeping watch for clues on interest rate direction in the developed world.

“Jackson Hole is keeping sentiment buoyant, while the rest of the week is rather clear of potholes,’’ Zulkifli said.

Closer to home, the return of foreign investors has boosted asset prices across the region.

The inflow of foreign funds into the market pushed the ringgit to a 10-month high last Friday. At 3.1563 against the US dollar yesterday, the ringgit had strengthened 3.3 per cent so far this year.

Other regional currencies have also experienced faster appreciation. The Indonesian rupiah has advanced 4.1 per cent against the US dollar year-to-date, while the Thai baht is up 3.5 per centover the same period.

The threat of further currency volatility, however, remained high on analysts’ watch list.

Rosnani said Malaysia’s economy would be able to weather the volatility emanating from the slowdown in US quantitative easing measures.

“Malaysia is better prepared in our view compared with other emerging countries, thanks to its steady rise in international reserves, solid export outlook and a comfortable current account surplus,’’ she said.

 

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